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Under the current economic climate, fraudulent load booking by bad actors is a common occurrence

September 20, 2023

Risk issues, evaluation and guidance for contingent cargo insurance.

The situation is as follows. A shipper of freight hired freight broker “XYZ.” (Note: a freight broker is like an insurance broker — an intermediary. The freight broker stands between the shipper and a motor carrier.) XYZ placed the client’s freight with “what they thought” was a motor carrier. The failure of the vetting services they deployed when selecting a motor carrier resulted in putting the load, not on an actual motor carrier, but on a fraudulent actor that stole the load at pickup. The impostor used a motor carrier called “ABC Truck Lines,” but the information and email used to book the load did not belong to the motor carrier, and XYZ did not verify that they were, in fact, booking with ABC Truck Lines legitimately.

Insurance payment that was sought of ABC Truck Lines to cover the cargo “theft” was denied by a motor carrier that never took possession of the freight and was therefore not responsible by law for the cargo that was shipped. Motor truck cargo legal liability carried by motor carriers has that trigger of “in their care, custody and control,” which was not the case. No coverage, therefore, because they were not booked and did not take possession of the load upon discovery.

Insurance for XYZ was a “contingent” cargo liability, which typically only triggers if the cargo coverage of a motor carrier fails to pay a valid and substantiated claim, or if the motor carrier insurance is unable to respond to such a claim, because its insurance is non-existent, invalid or insolvent, per what is outlined in the document, further excluding cargo claims if no agreement exists between the motor carrier and broker. Exclusion of the policy also adds losses resulting from dishonest acts of the insured, insured’s agent’s employees, or motor carrier for whom the cargo was entrusted. In addition, no agreement existed between the thieves and XYZ; the policy has a full dishonesty exclusion for motor carriers for whom XYZ, as broker, entrusts the cargo.

So all seems to be correct — as the insurance purchased would not trigger and, further, it excludes dishonest acts of any motor carrier, real or not real; add the agreement trigger — sometimes brokers will even skip a step and not have a broker/carrier agreement in place. In this case, the motor carrier was fraudulent; what broker XYZ thought they had was not the true motor carrier, further limiting the response from the policy.

Coverages that should help (if they are in force) for shipper/broker

  • Shipper/client may also have a shipper’s interest (SI), stock throughput or transit cover that provides them protection for theft of goods in transit, etc.
  • XYZ could have a primary cargo cover in place versus contingent, but it is not typical for freight brokers to buy that cover due to the high cost. Primary cargo cover essentially takes out the “contingent” aspect of cover; to further add 100% of cargo cover excludes dishonest/fraudulent acts, so having a broker/motor carrier confirm they have loss due to dishonest acts is key in making sure coverage is on par. Moreover, for their protection, shippers should always have a shipper’s interest (SI) or stock throughput cover. Always being in control of loss to the goods is preferable to relying on a sub-par broker and/or motor carrier cover (which is typically how smaller freight brokers purchase and provide services). Purchasing no cover to respond or omitting to carry out standard vetting processes when putting a load with a motor carrier is simply leaving oneself wide open for fraud and subsequent losses.
  • From a compliance standpoint, XYZ should have had a BMC 84 bond on file for a minimum of $75,000 (sometimes they buy more limits). Both shippers and carriers can file claims against brokers for payment. They must demonstrate there was a contract agreement in place and executed (including correspondence, emails and other documentation, affirming why the broker is not paying [on company letterhead on the filing against bond, signed and properly executed]) and that they are due the amount claimed.

If XYZ and shipper have a contract that holds them to indemnify for all losses of cargo, that still can be used, but obviously not supported by the freight brokers contingent cargo. Freight brokers usually carry E&O for any acts or omissions, mistakes etc. As this is coverage for the broker, not the shipper, they may have evidenced they had coverage and a limit.

Theft of freight updates

In the current economic climate, fraudulent load booking by bad actors is a common occurrence. Only the best brokers can vet those out with database checks and balances, red flags and protocols for every load; bad actors can still get in if they can play the game better than others looking to steal goods.

Obviously, the U.S. economy heightened the risk for these fraudulent events. CargoNet is a great resource to mitigate the risk of cargo thefts. Our shipper/broker community is using disposable trackers, geofencing and other tactics to stop theft or to improve recovery of the cargo.

However, risk mitigation does add expense and needs to run through a cost/benefit analysis. If a broker can book your load cheaper, and are cheaper, you will likely have a few of these types of claims, and WTW suggests a stock throughput or other transit product to cover the cargo in the life of transit to the end user/destination.


Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).


Lori Weick
Senior Broker, Transportation & Logistics
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Transportation & Logistics Industry Vertical Division Leader, North America

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